Reasons that the Prescription Drug Market Doesn’t Work for Patients

Reasons that the Prescription Drug Market Doesn’t Work for Patients

What is required in America to get critical medical care? This took her entire life for Laura Matson, a type-1 diabetic. She had to sell her car and furniture, rent, and even give away her dog Nicky, as reported by the BBC, to pay for her insulin treatments.

In a way, these rising costs are strange. Many consumer goods prices — nutritious food, digital devices, clothes, etc.— generally fall as technology advances and production becomes more effective. Why is this legislation an exception to health care?

After all, most American drugs are made from relatively simple ingredients. So, drugs cost very little to manufacture when therapies have been developed. Insulin itself is a science century old. So why are the insulin treatments for Matson and costly? How Regulation Makes Health Care More Expensive

Regulation in the health care industry drives up prices for patients in many ways

The approval system of the Food and Drug Administration needs billions of dollars and operation over almost a decade. It strangles supply by hindering production and by stopping smaller firms from entering the market, limits competition. And as Economics 101 teaches us, higher prices mean lower output and less competition.

It is illegal to import or resell cheaper drugs of comparable quality manufactured abroad. Patients lose at every point as legislation narrows the available options. Treatments that save lives are becoming more difficult to access and more costly.

In return in Matson, by restricting competitive market development at every stage, regulation increased the cost of her insulin treatments. A generic version of a drug or insulin injector pump can drop the price by up to 90%, but generics are prohibited by the state. Canadian drug makers can buy nearly identical, perfectly safe insulin drugs, but imports are illegal. Heavily regulated insurance issuers in each state are legally limited to a few, and each contract only reimburses a few brands.

Pharmacies could provide common penny treatments in the 1990s, rather than costly, state-of-the-artrt technology. Matson may have been willing to test her blood sugar with boring strips more than once a day or deal with vials and needles if it meant that she could keep her apartment and her beloved dog. But her choice is denied by regulations.